Built in 1851 as a model prison, Boston's Charles Street Jail was closed by federal order in 1973, after prisoners rioted over poor living conditions. But today people are clamoring to get into its cells. Last year the jail was reincarnated as Liberty Hotel, and the stone edifice has become one of Boston's trendiest spots.

"I was crazy enough to take it on," says the hotel's developer, Richard Friedman of Carpenter & Co. in Cambridge, Massachusetts. Despite the $150 million acquisition and renovation cost, he says he jumped at the challenge of restoring "a federal, state, and city landmark in a fantastic location and change its use."

Location and unique architecture also inspired the Four Seasons to convert a former Turkish prison into the Sultanahmet hotel. "It's the best location in the Old Town in Istanbul, located almost in the outer gardens of the imperial Topkapi Palace, built in very ornate style, with lots of windows, tiles, and stone details," says Marcos Bekhit, regional vice president and general manager for the chain.

Hotels converted from palaces, castles, convents, manor houses, and other historic buildings are now commonplace. Portugal and Spain boast entire chains of pousadas and paradors in such properties, and the Relais & Châteaux hotel network includes many others worldwide.

But one of the latest hospitality trends is transforming much more outré properties—like a jail, cave, church, or shoe factory—into fashionable hotels. (See slideshow here.)

The distinctive character and feel of an unusual structure is very difficult to replicate in a brand-new hotel, say hoteliers. Sometimes the stellar location can't be replicated. "Frankly, most of the best or most interesting building sites are already taken," says Bjorn Hanson, associate professor at New York University's Tisch Center for Hospitality, Tourism, and Sports Hospitality.

The expectations of younger hotel guests are a driving force behind outré hotel conversions, according to experts. "Generation X and older Generation Y members crave more of an experience in a hotel than just a room," Hanson says. As a result, hotel chains have rapidly launched "lifestyle" boutique brands to cater to this yearning, like Starwood Hotels and Resorts' Aloft, whose loftlike rooms were designed specifically for Gen Xers; InterContinental Hotels' Indigo; and Hyatt Hotels' Andaz.

Hotel chains are much less rigorous about design standards and space allocation than ever before, as long as a hotel meets quality and service standards and is willing to experiment, Hanson adds.

The value of a built-in backstory that can be exploited for marketing purposes is another factor. The Liberty takes many playful swipes at its checkered past in ad taglines that note "Boston's most captivating address," design marked by intact cellblocks with iron bars and nomenclature. The McMenamins hotel chain, synonymous with quirky conversions of schools, a Polish social club, and a "poor farm" in the Pacific Northwest, often celebrates the buildings' history with, for example, wall murals of local historic events or captions about former patrons.

"The history provides another dimension to our places, which are all about character. Why destroy that, as it gives an added advantage to your business model and brings people in?" asks Brian McMenamin, co-owner with his brother Mike, of Kennedy School hotel, a former elementary school in Portland, Oregon, where blackboards in guest rooms list movies and concerts, and where smoking is permitted in a bar called Detention (but not in the Honors bar, though you can listen to opera recordings as a consolation prize there).